Articles Posted in real estate law

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A California condo owner sued his association for repair costs In plaintiff’s suit against the homeowner association for repair costs to his condo aused by a leaky sewer pipe beneath the concrete slab underlying plaintiff’s condominium. The association argued that the sewer pipes were exclusive use common areas, so the owner was responsible for repairs.

The Davis-Stirling Act (sec. 1351) defines “exclusive use common area” as a portion of the common areas for the exclusive use of one or more, but fewer than all, of the owners of the separate interests and which is or will be appurtenant to the separate interest or interests. This includes fixtures designed to serve a single separate interest, but located outside the boundaries of the separate interest.

The court held that interconnected sewer pipes couldn’t really be said to be the “fixtures” of any particular unit. A sewer system is a series of interconnected pipes which ultimately feed into one common line. Differentiating parts of that interconnected system is unreasonable. The portion of piping coming from one unit is no more affixed to that unit than it is to the sewer system and other pipes or piping within that system. The court affirmed the award of about $17,000 is affirmed as, under a natural reading of the CC&R’s, the sewer pipe was a genuine common area to be maintained and repaired by the association.

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California’s Solar Shade Control Act gained some notoriety in 2005 when some homeowners were criminally convicted of a violation, requiring them to prune their trees. As a result the law was revised to eliminate criminal prosecution and make it more workable for homeowners.

The Act provides that, once a solar collector is installed, the neighbors cannot allow any subsequently planted vegetation cast a shadow over more then 10% of the collector surface at any one time between 10:00 am. and 2 pm. (Cal. Pub. Res. Code section 25982.) The Act also provides for a voluntary Notice to be mailed to neighbors containing statutory language regarding the installation of a solar collector, and the requirements of the act. (Cal. Pub. Res. Code section 25982.1.)

Rather than allowing criminal prosecution, the revised Act provides that improper shading is a private nuisance, allowing the homeowner to take civil court action.

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The insurer, MBIA , claims that Morgan Stanley made loans to homeowners who couldn’t afford them, and packaged the risky loans into securities that did not meet its underwriting guidelines. They also allege that Morgan’s servicing arm did not have the staffing or ability to service the loans. MBIA, relying on Morgan’s misrepresentations, insured the securities for over $200 million. The complaint can be found here.

A homeowner who cannot afford the mortgage unlikely could afford to prove, in a lawsuit, what really happened in their individual case. As the big money comes in to play, the evidence will start gushing out.

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Depositions in Bankruptcy cases are providing bits and pieces of how the mortgage industry worked the last few years. In addition to learning about the robosigners who were “vice presidents” of MERS, this recent revelation, noted by Mike Konczal, reveals a fundamental flaw that may exist in many Countrywide sourced- loan foreclosures.

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A camper was riding a bicycle in a National Forest in California. A forest service employee hit him with his car. The camper sued the U.S. for damages.

The trial court said that the government was immune from liability to a recreational user of the land, due to Civil Code section 846. This provides that landowners owe no duty of care to recreational users. The purpose of this law was to encourage owners of of rural property to allow recreational use, and not fence their land. The camper appealed.

The California Supreme Court found for the camper, saying that when an landowner using their property engages in “active conduct,” they can be liable for negligence which causes injuries to recreational users.

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California Civil Code section 2923.5 requires that, prior to recording a Notice of Default (the first step in a non-judicial foreclosure), the lender must contact the borrower to assess their financial situation and explore options to prevent foreclosure.

An Orange County homeowner filed suit against the lender for recording a notice of default without contacting them. The judge gave them a restraining order stopping the foreclosure.

The lender argued that the Civil code was preempted by federal law. The concern is that when there is federal law regulating federally chartered lenders, state law cannot be enforced if it impacts an important part of the mortgage contract.

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A commercial lease specified an address for service of notices. Here was a default, and the landlord sent notice to the tenant’s leasing agent (by mail, fax, and email), who was not at the address specified in the lease. The agent acknowledged receiving notice by email.

In the eviction action, the court ruled, in a slam-dunk decision, for the tenant because the notice went to the wrong address. First, although the leases’s notice provision varies from the unlawful detainer statutes, that is allowable in commercial leases.

Secondly, the landlord also emailed the notice to the agent. The landlord argued that, as email is not mailing address specific, it could have been received at the designated address. The court points out that this is a problem of the lease language, which does not indicate an acceptable electronic notification address.

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Bingo Investments was in the business of making mezzanine loans in real estate matters. In a mezzanine loan, the borrower owns an entity (i.e. an LLC) that owns real property. The borrower does not actually own the real property, just the LLC. The mezzanine lender takes a security interest not in the real estate, but in the LLC that owns the real estate.

Bingo hired Greenlake Capital to find financing sources for Bingo’s loans. They were successful, and Bingo got a line of credit for $150 million. The credit line was secured by Bingo’s assets, likely Bingo’s equity interest in mezzanine borrowers (not the underlying in real property). But Bingo then refused to pay Greenlake its fee of $3 million, 2% of the funding. It claimed that Greenlake could not collect, because this arrangement required Greenlake to have a California real estate broker’s license to get paid. (California Business & Professions Code section 10131(d).

Greenlake argued that it only negotiated a credit facility that itself did not make any loans, and Bingo had yet to present a qualifying loan to the lender. The lower court ruled for Bingo.

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Some southern California brokers listed a home for $749,000 to $799,000. A buyer entered a contract to buy for $749,000, and proceeding to sell their own house so they could pay for the new house.

The Brokers knew, but did not tell potential buyers, that there were loans against the property for over one million dollars, and the sale would never close unless they solved a little $392,000 problem by getting a short sale approved or the buyers throwing more cash at the deal.

The court first noted that when a seller knows of facts materially affecting the value or desirability of the property which are known to only him and not easily discoverable by the buyer, the seller has a duty to disclose. Where the broker knows of these facts, he is under the same duty.

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Al’s siblings were put on title to Al’s property so that it would pass to them if Al died. Al decided to create a trust, and have the trust be on title, so the siblings conveyed title back to Al, and Al conveyed the property to the trust. But, Al did not create the trust until 13 days later. The deed from Al to the trust was then recorded, and Al died shortly thereafter.

Al’s siblings claimed that the transfer to the trust was ineffective, because the deed was signed before the trust was created. The Court said it was effective, and the trust owned the property. The question has never appeared in a California published decision, so the court looked at the law in other states. It agreed with the general rule that a deed to a corporation made before its organization is valid between the parties, though void if asserted against third parties. It found that here, Al the individual granted the property to Al the trustee, anticipating the creation of the trust. Therefore, the deed was effective between them.

Luna v. Brownell (2010) 185 Cal.App. 4th 668.

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